Sears shares slumped 12% in after-hours trade after reporting an adjusted fiscal first-quarter loss that was much worse than analysts expected.

“Our first-quarter 2013 financial performance is not acceptable,” CEO Eddie Lampert said on a conference call with analysts. “A company of our size and with our assets should be generating a significant profit.”

Its U.S. same-store sales dropped 3.6% on declines at both its Sears department stores and Kmart discount chain.

Online sales were a bright spot, up 20%, and the company said it’s also evaluating strategic alternatives for its service contract business to bolster liquidity, including a possible sale.

Lampert said the company is also considering other options and told investors they should expect a “transaction tied to its real estate.” He didn’t elaborate.

Meanwhile, Sears’ cash reserves fell 23% to $481 million while its debt rose 23% to $3.8 billion on increased borrowing to fund operations.

However, he declined to provide numbers on its online and member business, including whether online can eventually cover lost profits at its physical stores. The company said its Shop Your Way members now generate over 60% of its revenue at Sears and Kmart in the U.S.

Sears said sales at its namesake department store chain were hurt last month by cold weather — a setback for its outdoor products — while Kmart sales were dinged by a 2% payroll tax hike.

“I do not subscribe to the view that the macro factors are the sole reason for our poor performance,” Lampert said. “They have an impact . But even with that impact, we should be doing a lot better than we are. Changing customer buying habits and changing forms of competition are challenging us in the retail industry generally and we must evolve our company and our business models to meet this challenge.”

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